Business Strategy: Australian Supermarket Industry Analysis Report

This report provides an in-depth analysis of the business strategy within the Australian supermarket industry, specifically focusing on the competitive dynamics between Woolworths and Coles. It begins with an overview of the industry and highlights key strategic issues, including the increasing competition from international retailers like Aldi. The report then undertakes an industry analysis using Porter's Five Forces to assess the bargaining power of buyers and suppliers, the threat of substitutes, the threat of new entrants, and the level of industry rivalry. Furthermore, the study applies strategic models such as Porter's Generic Strategies, Ansoff Matrix, and Bowman's Matrix to recommend future strategic directions for Woolworths and Coles, considering the challenges posed by Aldi's cost leadership strategy and the evolving consumer preferences. The analysis emphasizes the importance of adapting to changing market conditions and the need for strategic responses to maintain market share and profitability in a competitive environment. This report is a valuable resource for understanding the complexities of the Australian retail sector and the strategic considerations for major players in the industry. The case study highlights the need for Woolworths and Coles to adapt to a changing market and the threat posed by Aldi and other international entrants.

Running head: BUSINESS STRATEGY
BUSINESS STRATEGY: A CASE STUDY OF AUSTRALIAN SUPERMARKET
Name of the Student:
Name of the University:
Author’s Note:

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EXECUTIVE SUMMARY
This report undertakes an analysis of the concept of business strategy in the particular
context of the case study “Australian Supermarkets: Who Will Win And When?”. The
report thereby begins by offering an overview of the Australian supermarket industry
and also highlights the different important issues faced by it as discussed in the case
study. Next, an industry analysis of the Australian retail industry had been undertaken to
determine the business competition faced by Woolworths and Coles in the concerned
nation. Lastly, various strategic models like Porter’s Generic Strategies model, Ansoff
matrix and Bowman’s matrix had been used to recommend the strategic directions that
Woolworths and Coles need to follow in future.

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Table of Contents
1.0 Introduction..................................................................................................................3
2.0 Overview of the Australian Supermarket.....................................................................3
3.0 Strategic issues highlighted by the case “Australian Supermarkets: Who Will Win
And When?”.......................................................................................................................4
4.0 Porter’s Five Forces Analysis of the Australian Retail Industry..................................6
4.1 Bargaining Power of the Buyers..............................................................................6
4.2 Bargaining Power of the Suppliers..........................................................................7
4.3 Threat of Substitutes................................................................................................7
4.4 Threat of New Entrants............................................................................................7
4.5 Industry Rivalry........................................................................................................8
5.0 Application of strategic model......................................................................................8
5.1 Porter's Generic Strategies model...........................................................................8
5.2 Ansoff Matrix............................................................................................................8
5.3 Bowman’s Matrix......................................................................................................9
6.0 Conclusion...................................................................................................................9
7.0 References................................................................................................................10

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1.0 Introduction
As opined by Johnson (2016), an integral aspect of the present business
landscape is the fact that unlike the earlier times the customers in the present times
have more choices available on the score of the mushrooming of the different business
corporations in the last few decades. West, Ford and Ibrahim (2015) are of the
viewpoint that the enhancement of the number of choices or for that matter the options
that are available to the customers had substantially enhanced the business competition
experienced by the business corporations within the business markets of their
operations. More importantly, it had been seen that this had adversely affected the
business prospects or for that matter the growth attained by the different business
corporations in the present (Salavou 2015). However, at the same time a detailed
analysis of the contemporary business landscape succinctly reveals the fact that the
different business corporations in order to cope with the extensive business competition
that they experience within the business markets of their operation take the help of
different kinds of business strategies (Leonidou et al. 2017). In this relation, it needs to
be said that the business strategies which are being used by the business corporations
should be intended to create as well as capture value for it and also in alignment with
the requirements or the demands of the business markets of their operation. This report
intends to undertake an analysis of the concept of business strategy in the particular
context of the case study “Australian Supermarkets: Who Will Win And When?”.
2.0 Overview of the Australian Supermarket
Kotabe and Kothari (2016) are of the viewpoint that one of the most important
aspects of the retail landscape of the nation of Australia is the fact that more than 80%
of the market share of the concerned industry in Australia is being held by two retail
corporations, namely, Woolworths and Coles. For instance, it was seen that the retail
corporation Woolworths held monopoly within the retail landscape of the nation under
discussion here. However, after getting merged with Wesfarmers, Coles started to pose
real challenge or for that matter business competition to Woolworths. More importantly,
it had been seen that the majority of the products or the services offered by both the

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retail corporations, the business strategies used by them, the business model used and
other aspects of their business are almost similar in nature. However, the major problem
arises because in the recent times it had been seen that different foreign retail
corporations like Aldi and others have started their business operations in the nation of
Australia which in turn had substantially enhanced the business competition within the
retail sector of the concerned nation. Mao et al. (2016) are of the viewpoint that the
resultant effect of this is that unlike the earlier times Woolworths and Coles have started
to lose their monopoly in the retail sector of the nation of Australia and if adequate
strategies measures are not being taken by them then it is likely that this fierce business
competition would adversely affect the business prospects or for that matter the growth
of these two retail giants of the nation of Australia.
3.0 Strategic issues highlighted by the case “Australian Supermarkets: Who Will
Win And When?”
Davcik and Sharma (2016) are of the viewpoint that the business corporations
need to frequently scan the business environments or for that matter the business
markets in which they are operations for the effective conduct of their business
operations. Adding to this, Madsen and Walker (2015) have noted that one of the most
important benefits that this offers to the business corporations is the fact that it offers
them adequate information regarding the recent trends or for that matter the factors that
they need to take into account for the conduct of their operations in the business
markets. More importantly, as discussed by Prajogo (2016), this also offers the required
information or the insight to the business corporations on the basis of which they can
formulate the different strategies that will in turn guide their business operations or
activities. These in short are some of the factors which motivate the business
corporations to undertake an analysis of the business environment in which they
operate or for that matter identify the different strategic issues that they face in the
business markets.
The case study “Australian Supermarkets: Who Will Win And When?” clearly
indicates that there are various strategic issues that the two retail corporations,

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Woolworths and Coles, are presently in the retail sector of the nation of Australia. More
importantly, the case study under discussion here in a succinct manner also indicates
the fact that the majority of the strategic issues faced by the two above-mentioned retail
corporations can be attributed to the entry of the German retail corporation, Aldi, within
the retail sector of Australia. For instance, it had been seen that the entry of Aldi within
the retail sector of Australia had facilitate a change within the status quo of the
concerned industry of Australia. More importantly, it is seen that the effective business
strategies used by the retail corporation Aldi had also greatly contributed towards the
success attained by it in the nation under discussion here and thereby adversely
affected the business prospects of the different retail corporations of the nation under
discussion here.
The mission of the retail corporation Aldi is “All people wherever they live should
have the opportunity to buy everyday groceries of the highest quality at the lowest
possible prices”. More importantly, it had been seen that for the effective attainment of
this end the retail corporation under discussion here uses the cost leadership strategy.
Furthermore, it had been seen that through the adequate usage of this strategy had Aldi
to organize discounted sales wherein the customers have the opportunity to purchase
the best quality groceries or for that matter other products of daily consumption at the
lowest possible prices (Grimmer, Miles and Grimmer 2015). On the other hand, it had
been seen that the retail corporations like Woolworths, Coles and others because of the
monopoly that they hold within the Australian retail sector no longer frequently takes the
help of this particular measure for the sale of the groceries and other products of daily
consumption offered by them. In addition to these, an important issue that the retail
corporations like Woolworths, Coles and others are presently facing can be ascribed to
the fact that they have given up the usage of the cost leadership strategy and are
presently using the mid-premium pricing policy so as to effectively focus on the attribute
of quality.
The entry of Aldi and other international retail corporations within the retail sector
of the nation of Australia had given to various strategic issues for the retail corporations
of Australia like Woolworths, Coles and others. Thompson, Strickland and Gamble

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(2015) are of the viewpoint that this had substantially affected the customer base and
thereby the profitability of the different retail corporations of the nation of Australia. For
instance, in the earlier times it was seen that the customers in the nation of Australia
had no option but to purchase the groceries or the other products from Woolworths and
Coles because of the monopoly that they held in the retail sector of the concerned
nation on the score of the lack of options related to the same which were available to
the customers. However, presently, it had been seen that the entry of the different
international retail corporations like Aldi and others had increased the number of options
that are available to the customers. More importantly, presently it is seen that the
customers rather than merely focusing on the aspect of cost, are also taking into
account the quality of the products or services, the brand image of the retail
corporations and other (Kajalo and Lindblom 2015). The resultant effect of this is that
the business of the major business operations of the major retail corporations of
Australia are getting adversely affected because of this since it had not only reduced the
number of customers of the retail corporations but also the sales volume and thereby
the profitability of the retail corporations as well (Jenkins and Williamson 2015).
4.0 Porter’s Five Forces Analysis of the Australian Retail Industry
4.1 Bargaining Power of the Buyers
As discussed by Herrera (2015), a low level of buying power of the buyers
positively affects the business prospects of the business corporations and vice versa.
However, within the particular context of the Australian retail industry it is seen that the
bargaining power of the customers or for that matter the buyers is very high because of
the presence of the large number of retail corporations like Woolworths, Coles, Aldi and
others. For instance, in the earlier times it was seen that the bargaining power of the
customers was low since the customers did not have adequate options related to the
purchase of the grocery or other daily consumable products (Madsen and Walker 2015).
The surge in the number of retail corporations had directly increased the number of
choices or for that matter the options that are available to the customers and this in turn

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is presently adversely affecting the growth prospects of the retail corporations like
Woolworths, Coles and others in the nation of Australia.
4.2 Bargaining Power of the Suppliers
Jenkins and Williamson (2015) are of the viewpoint that if the bargaining power
of the suppliers associated with a particular business corporation is low then this
positively affects the business prospects of the concerned corporation. In the particular
context of the retail sector of Australia or more precisely in the case of Woolworths and
Coles it had been observed that the bargaining power of their suppliers is very since the
concerned corporations take the help of third party vendors or retailers for the
procurement of the grocery products. However, in the case of Aldi it is seen that the
concerned corporation takes the help of firm contracts for the management of its
suppliers and also for the purpose of selling the grocery products under their own brand
name. Furthermore, the usage of this method had also helped the retail corporation
under discussion here to reduce the price of the grocery products offered by it by more
than 25%.
4.3 Threat of Substitutes
A decade ago the retail corporations of Australia, namely, Woolworth, Coles and
others, faced negligible amount of threat from the different substitutes. However,
presently it had been seen that Woolworths and Coles are facing a high level of threat
of substitution from the other retail corporations like Aldi and others. This can be
attributed to the innovative business strategies, innovative product development policies
and others used by Aldi and others which the two major retail giants of Australia,
Woolworths and Coles, are failing to use even in the present times.
4.4 Threat of New Entrants
Woolworths and Coles are facing a high threat from the new entrants within the
retail sector of the nation of Australia. For instance, it had been seen that the new
entrants within the retail sector of the nation of Australia are taking the help of different
kinds of innovative business strategies related to product, marketing, business model
and others for the purpose of satisfying the different needs or for that matter the
requirements of the customers (Prajogo and Oke 2016). This in turn had adversely

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affected the growth or for that matter the profitability of Woolworths, Coles and other
retail corporations in the nation of Australia.
4.5 Industry Rivalry
A few years ago the retail sector of Australia was completely monopolized by
Woolworths and Coles and they held more than 80% of the market share in the retail
sector of the nation of Australia. However, presently because of the entry of different
international retail corporations in the retail sector of the concerned nation which are
using better innovative business strategies had substantially intensified the rivalry within
the retail sector of Australia (Grimmer et al. 2017).
5.0 Application of strategic model
5.1 Porter's Generic Strategies model
As per Porter's Generic Strategies model, the business corporations have the
option to use any of three strategies, namely, cost leadership, product differentiation
and focus for the attainment of competitive advantage or for that matter long-term
growth (Goodman and Remaud 2015). The case study clearly reveals that the fact Aldi
in the last few years have been able to attain a substantial amount of success in the
retail sector of Australia through the effective usage of the cost leadership strategy. This
as a matter of fact has important implications for the different retail corporations of the
nation of Australia like Woolworths, Coles and others. For instance, these retail
corporations also have the opportunity to take the help of this particular strategy for the
enhancement of their profitability and success.
5.2 Ansoff Matrix
The success attained by the retail corporation Aldi in the nation of Australia in a
succinct manner highlights the benefits that Woolworths and Coles can derive through
the adequate use of the strategy of product diversification. More importantly, through
the adequate usage of this particular strategy Woolworths and Coles have the
opportunity to offer the kind of grocery products which would be superior in nature or
quality in comparison to those offered by its competitors. This in turn would enable it to
gain long-term growth and also create or capture for its customers as well.

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5.3 Bowman’s Matrix
Grimmer, Miles and Grimmer (2015) are of the viewpoint that the business
corporations in order to attain competitive advantage need to position the products or
services in the markets in terms of either the cost of the same or its quality. Aldi had
been able to gain a unique market position within the retail sector of the nation of
Australia because of its effective focus on the attribute of cost. This is something that
Woolworths and Coles can also follow for the purpose of attaining a unique market
position and also for the purpose of accelerating the pace of their growth.
6.0 Conclusion
To conclude, the business corporations need to effectively identify the strategic
issues or the other issues that they face in the business markets of their operation. This
will enable the business corporations to design or for that matter formulate the desired
kind of business strategies which in turn would not only enable them to overcome those
strategic issues but also accelerate the pace of their growth as well. However, at the
same time it needs to be said that the business strategies formulated by the business
corporations needs to be in alignment with the strategic goals or for that matter the
objectives that they are trying to attain in the business markets of their operations.
Furthermore, the business corporations also need to take the help of different kinds of
strategic models for the formulation of the desired business strategies. These aspects of
the concept of business strategy become apparent from the above analysis of the same
in the particular context of the case study “Australian Supermarkets: Who Will Win And
When?”.

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7.0 References
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advantage: A review and future research directions. Journal of Business
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Goodman, S. and Remaud, H., 2015. Store choice: How understanding consumer
choice of ‘where’to shop may assist the small retailer. Journal of Retailing and
Consumer Services, 23, pp.118-124.
Grimmer, L., Miles, M.P. and Grimmer, M., 2015. A research note on the effect of
entrepreneurial orientation on small retailer performance: a resource-advantage
perspective. International Entrepreneurship and Management Journal, 11(2), pp.409-
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Grimmer, L., Miles, M.P., Byrom, J. and Grimmer, M., 2017. The impact of resources
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Management, 55, pp.7-26.
Herrera, M.E.B., 2015. Creating competitive advantage by institutionalizing corporate
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Jenkins, W. and Williamson, D., 2015. Strategic management and business analysis.
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Johnson, G., 2016. Exploring strategy: text and cases. Pearson Education.
Kajalo, S. and Lindblom, A., 2015. Market orientation, entrepreneurial orientation and
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Kotabe, M. and Kothari, T., 2016. Emerging market multinational companies’
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developed countries. Journal of World Business, 51(5), pp.729-743.

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Lasserre, P., 2017. Global strategic management. Macmillan International Higher
Education.
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Salavou, H.E., 2015. Competitive strategies and their shift to the future. European
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Thompson, A., Strickland, A.J. and Gamble, J., 2015. Crafting and executing strategy:
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